“Stock-out” costs are those incurred by running out of a product. For example, if a customer goes to a vendor with a particular item in mind and that item is not available on the vendor's shelf, the vendor will lose that potential sale and any subsequent sales that the consumer might have made. “Stock-out” can happen if the vendor has sold all of the items, or if the vendor has sold all of the items accessible to the consumer but still has some in storage. For large vendors, the latter cause of “stock-out” can cost up to billions of dollars in lost revenue.
One potential solution to “stock-out” has been the use of radio frequency identification (“RFID”) tags and RFID readers placed on shelves in stores. This solution requires that each individual item be tagged and the shelves be retrofitted with RFID readers. However, the cost of even passive RFID tags is in excess of $0.25 each, which is significantly too high to create a positive return on investment.